The Health Care Industry: Protectionism the Free Traders Love

Suppose that people in the United States paid twice as much for our cars as
people in Canada, Germany, and every other wealthy country. Economists would
no doubt be pointing out the enormous amount of waste in the US auto industry.
They would insist that we both take advantage of the lower cost cars available
elsewhere and take steps to make our own industry more efficient.

For some reason, economists do not have the same attitude towards health care.
Most seem little bothered by the fact that we spend more than twice as much
per person as people in other countries, with no obvious benefit in terms of
health care outcomes. This lack of concern is especially striking since health
care is a far larger share of the US economy than autos, comprising 17 percent
of total output, as compared to about 3 percent for autos.

The excess health care spending comes to more than $1.2 trillion a year or
the equivalent of more than $16,000 for a family of four. Paying too much for
health care has the same economic impact as a health care tax. In effect, we
have a health care waste tax that is about 10 percent larger than the projected
federal revenue from the personal and corporate income tax combined. In short,
this is real money.

However, the enormous waste in the US health care sector does not arouse anywhere
near as much concern as items like the "buy America" provision in
the stimulus package. This provision, which applies to a small fraction of the
recently passed stimulus package, was the topic of a front-page article in The
Washington Post.
The article warned that this protectionist provision could lead to the unraveling
of the world trade system.

While features of health care can make trade in health care services more difficult
than trade in autos, it is possible for the barriers to be bridged. If the self-proclaimed
"free traders," who dominate the economics profession and policy debates,
actually were free traders, they would be pushing hard to allow people in the
United States to benefit from international trade in medical services in the
same way that US consumers have benefited from low cost imports of cars and
clothes.

There are several obvious paths through which the United States could gain
by freer trade in health care. First, we could construct trade deals that simplify
the process through which foreigners can train to meet US standards for becoming
doctors, dentists, and other highly paid medical specialists.

The point would be to set up procedures through which students in countries
like Mexico, China, and India could train to meet our standards, and then would
have the same ability to practice in the United States as US trained doctors.
This could be easily implemented and offer large gains to both countries, especially
if the US paid a fee to compensate for the medical training offered to foreigners,
so that two to three doctors could be trained for every one that practiced in
the United States.

An even simpler route for gaining from trade would be to allow Medicare beneficiaries
in the United States to buy into the much cheaper health care systems in other
countries. The government could split the savings with the beneficiaries, allowing
them to pocket thousands of dollars a year, while saving the government the
same amount. The receiving country could even get a premium over its costs in
order to give it an incentive to take part in the program.

Finally, the government could try to standardize rules around the rapidly growing
industry of medical tourism. Every year, tens of thousands of patients travel
to Thailand, India, and other countries to have major medical procedures performed
at prices that are often less than one-tenth as much as those in the United
States. The savings can easily offset the cost of travel for the patient and
several family members. If facilities were regulated and clear rules established
for legal liability, then more patients would be able to take advantage of the
potential cost saving.

However, the free traders are not interested in promoting free trade in health
care. They would rather just tell us that there is nothing that can be done
about exploding health care costs in the United States. This might have something
to do with the fact that the primary beneficiaries of protectionism in health
care are doctors and dentists, not autoworkers and steel workers (and the drug
and medical supply industry).

Economists and other self-proclaimed free traders are anxious to use trade
to reduce the income of manufacturing workers; they are very happy to have protection
for highly paid professionals. After all, their parents, siblings and children
can be doctors and dentists. They are unlikely to be autoworkers and steelworkers.

So, we are stuck with a hopelessly bloated health care system that most of
the economists and pundits say cannot be fixed. Insofar as this is a true statement,
it is because they and their wealthy friends do not want it to be fixed. It
really is that simple.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He is a regular Truthout columnist and a member of Truthout's Board of Advisers.